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Mike says:
Sure thing.. Land in Atlanta isn’t cheap. Inside the I_285 is crazy and, it is hard to find in most places. What land is available will usually have ledge [rock] buried underneath or have other issues.
Most small .25 to .33 lots run $38k to $65 k per lot. WAY TOO high for a start-up or a first time home buyer. Builders all around here want to build $350k to $600k homes.
So we finally found 4 lots 25 miles up I-85 north in a small bedroom community right outside of a small downtown street like where your store front is located. 5 minutes into the town.
We got the lots at $11k each=$44k total plus some small over due taxes, etc. for about $45k total.
Having my friend as a partner who is a Georgia licensed General Contractor, we will be pulling all our own permits and supervising everything myself. So the GC profits and the Superintendants cost is all going to profit.
These homes will be starter homes for first time buyers. About 1,800 to 1,995 SF each, with some stone work, fireplace, screened back porch, hardy plank siding, tile, granite counters but everything contractor grade.
We have all of the subs we used to use, actually 2 or 3 for most of the trades and still have good credit standings with them.
Of course at this stage, this is very broad brush, but…We are targeting to list the two ranch styles which will be on slab grade for about $175k to about $180k. Then the last wto will be ranch style but have walk out basements [unfinished of course] and will list at about $195k-$199k.
We are very confident we can build at approx. $50 per SF and think we can squeeze out at $40 to $45 per SF cost to build. So about $90K to build plus $11k for lan = $100k gross total and trying to Target about $100k gross per house, then of course will come some “soft costs” out of that and what we have to “throw in” to close, like some commissions, perks, etc.
We can build a house from scratch in 4 months +/- weather, rain or cold depending. We are going to do the first two slab ranchs fairly clsoe together, then the 2 walk outs late next year.
We are hoping to get as close to approx. $350k to $375K as possible in about 14 months or less +/-.The money comes from several sources. A small investor friend who has kicked in enough for the land and we will re-pay out of first house, the we will self fund the 2nd house, using personal resources. Then use the roll-back retained earnings for the last two. Projects like this you can’t dig into the income up front and run willy nilly with your profits. You have to be willing to plow back most into the company, but still keep a small revenue stream coming.
And we could of course go to the bank and do a construction loan of but prefer not to go that route if we can help it.I can do some periodic posts if anybody is interested as we go, but know SL isn’t a place for real estate transactions.
Mike at MDC Galleries
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–So are you going to build one house and sell, then use that money to build each additional house?
–Or are you going to build all four at once while you have men and equipment on site?
–How much are you borrowing from banks, investors, or your own bank accounts?
–Will the projected $350k be split between just you and a friend, so $175k each profit in a year after four houses are sold?I only ask because I see local guys build spec houses all the time and wonder what their true profit is. Almost $90k profit per house is pretty incredible. I can see the temptation to go all in as long as you think the market can handle it.
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I think the post already answers your first 3 questions: “So are you going to build one house and sell, then use that money to build each additional house?
–Or are you going to build all four at once while you have men and equipment on site?
–How much are you borrowing from banks, investors, or your own bank accounts?”– We can build a house from scratch in 4 months +/- weather, rain or cold depending. We are going to do the first two slab ranchs fairly clsoe together, then the 2 walk outs late next year.
The money comes from several sources. A small investor friend who has kicked in enough for the land and we will re-pay out of first house, the we will self fund the 2nd house, using personal resources. Then use the roll-back retained earnings for the last two.
And we could of course go to the bank and do a construction loan of but prefer not to go that route if we can help it.
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Mike it is amazing how construction costs vary – (or escalate) depending on location! 50 sf is crazy cheap compared to Seattle- well over 100 per sf for new construction costs (If you are your own general or super as you say) and 200 for a pre existing home-
Good luck on your venture, it sounds like you know what you are doing and what to expect!
best
sally -
Quick update on the “4 New Homes Real Estate” venture.
Due to holidays and rain we had to go with a later start than originally planned. AND another “Good” hold up.
We got plans for 2 of the 4 lots and were prepared to build them doing self funding. We posted the first two on the MLS listing service and before we even got a shovel in the ground we have got both houses sold, based on the lot location, the house design and pricing level.
So, two have signed agreement to purchase on them. Then we also got an investor to “invest” in the first one for a percentage return after the closing. Then from what is left [our profit] that will go for the second house expenses. We are going to build both at the same time. They are only 3 lots apart.
Rough numbers and targeting a 4 month build time … lot 15 sold for $188,900 and the lot and building costs [estimated] $116,081 = $72,819 gross profit and lot #11 sold for $198,000 with $121,860 lot and est. building costs for a rough ball park of $76,140 gross profit target or roughly ball parked at $148,959 after both are closed at the end of April.
2 lots are surveyed, boundaries and set-back lines marked, the house boxes are stacked and I met the grader out there yesterday. Permits went up yesterday and we will start clearing and pushing dirt probably Monday.
So.. that’s it for now. We will see how this goes.
Definitely taking a whole lot of time away from Ebay, Etsy and the start of the transition to SixBit. I may not go forward with this partner after these four because even though the money will be good, it is not my passion and I have a complete art studio I have waited 40 years to get into. I will have to decide on the quality of life vs. the money and tight scheduling thing that has been being discussed here on SL the past few weeks.
Mike at MDC Galleries and Fine Art.
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Amazing you have them sold already before they’re even built. What do you think the net profit of the two houses will be? Do you have a contractor that’s building them so you can just sit back and answer any questions?
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The figures above are fairly close to a ballpark net because I do have some “soft costs” included such as an amount we are contributing to closing, the lot-land of course is included, the real estate comm. of 6% is included, builders risk insurance, a 2/10 Warranty for the buyer, Gen. Liability all are already figured into the “building costs” Actual building and labor costs is lower than shown.
But the figures are before taxes. What will be left the GC and I take our shares out.
The Georgia Registered and Licensed General Contractor is my partner and i do the admin. side of things, read and sign documents, pull the permits all as a registered agent for his company, which is an LLC corp.
But I can see how much time is starting to be involved and I may just be on board for these 4 projects-houses, then cut bait. I want to double the Ebay listing, then install and learn SixBit then get everything listed on Etsy. Then run those two online businesses then get into my art studio and start creating larger abstract original paintings and also limited edition prints and smaller sculpture. That I would rather do, than do more houses, as you have said Jay, it is not all about how much money. If that were the case why did I stop the mid 6 figure a year job. It was about shutting that darn alarm clock and not taking phones calls to come into the plant at 3 am.
Mike at MDCGFA
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Thanks Troy. But for 3 days in a row now, I have had to hit the road around 5 AM drive 30 miles up the road and be at the job site. With permits in place, it is time for the rubber to hit the road. Spent 5 hours today just being their for a front loader to clear the more wooded lot. It was freezing cold, sleet coming down and my phone kept going off with Ebay questions, offers and cha-ching offers. The bulldozer guy was on break when a cha ching came in and he asked what is that? Funny.
I turned 70 years old last month, I would just rather have been back in my office, coffee in hand and dealing with the Ebay stuff than what I was doing.
When I get through with these 4, I may not do any more, but by the end of April, atleast I would have made some good ROI.
Jay you were prying loose tile, I was digging holes with post hole diggers yesterday and today shoveling out dirt away from the storm drains and placing new, fresh sand bags to catch the silt run-off before it got into the drains.
When I dashed out this morning I had 2 small hand carved wooden figurines which sold for $90. I had to leave them unpacked. Luckily they dont have to ship until Monday. But I really like to ship same day when I can.
My helper ran out of stuff to do yesterday because the house pulled me away so much this week I didnt get done what I needed to do in the Ebay process.
Mike at MDCGFA
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Quick up date.. Out of the 4 lots we bought last Nov. as stated up in earlier posts we had 2 of them sold before we ever broke ground. Those two houses are now almost done. They were graded, concrete poured [both were on a slab], all plumbing done, both framed, roof on, siding finished, windows, in and passed all inspections. Interior items all ordered lights, cabinets, fixtures, flooring, paint colors etc. and some interior work being done. Insulation and drywall is done so we are done to the final stages.
One was to close on April 30th and the other May 30th, but we moved the April over to both closing at the end of May. Some delays took place due to one customer wanting a bunch of upgrades which they took their sweet time in selecting.
Out of the last two lots we had left, we sold one of those lots for double what we paid for it to the nephew of my partner. So the third lot is off our plate and the table. That was just clean, crisp, quick cash by flipping that 3rd lot.
The 4th lot stills remains in our ownership. We own it outright so we can just let it set for as long as we want and decide later to maybe just flip it down the road or go ahead and build a third spec house on it.
I prefer not to build that last house and just flip the lot. The first two houses as I have said in earlier posts turned out to be a scenario whereby I bit off more than I could chew. Not experience wise but time and interest wise. I discovered it was taking way too much time to the point errors were being made on our Ebay businesses and things were not getting done in a timely manner. And I have not been able to get into the art studio either.
So after the end of May and we close on house 1 and 2 I am done with building houses. Just no interest in that type of work any more and at 70 years old it is just not worth the worry, hassle, bickering, problems with the subs, quality of work, on time scheduling, political and county inspectors, time constraint hassles and the buyers.
Profit or no profit, these are the last and I will be back 100% on our Ebay and Etsy stores and down in the studio creating and celebrating.
Mike at MDC Galleries and Fine Art
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You guys are amazing. We bought our building in July 2018, and are just finishing the second floor apartment.
You shared projected numbers back in Nov 2018, but how did the numbers actually turn out?
–How much did the houses sell for? (You had projected $175k sell price.)
–How much will it cost to build all said and done? (You had projected $100k cost)-
The wooded lot up on a slight hill sold for $198,900 and the one up the street on the flay non-wooded lot sold for $188,900.
Since these sold be fore we ever broke ground, they kind of turned out like custom houses but only in a very small way. We had already priced everything based on Gen. Contractor prices which we can still get from our older days in the business. But since the buyers bought very early [before we even broke ground], then of course they wanted to do some upgrades. We gave them an allowance number [based on our original cost estimates] and gave them our sales reps names and showroom addresses and they went to the showrooms and selected what ever they wanted as actual finished products and we just did an addendum to the sales agreement and paid us 50% down on the upgrades with the balance due at closing.
I don’t have final numbers yet because we still have about a months work to do on both houses and won’t have the final numbers until we are through with both closings. We kicked in $5,000 toward closing costs for both buyers, so will have to wait about a month to get the actual bottom line. Out of about 50 item categories on my spread sheet we have over estimated and underestimated some and the rest about where we thought. We have home building software that we used to use when we did this frequently and just had to update that. Also from the blueprints we had, we called our old vendors and asked them to give us a quote based on the prints we sent them. so we had pretty solid numbers going in.
The 3rd lot which we flipped we bought for $10,000 and sold within 90 days for $21,000.
Yep we can build a house in about 4 months straight out of the ground if we have the land free and clear. We built both of these at the same time, so they are almost both at the same point of completion.
After we pay back some of the side partner investors we still think about $40,000 ++ on both houses and we still have the fourth lot that we did not start on which we have to decide if we will or not, but based on my time constraints, I want to flip it also.
The last lot is a sloped lot which would require a walk out basement. About a 3,000 sq. ft. house, two story plus the walk out basement. These are more costly to build due to the excess concrete for the basement walls and some rough mechanicals down there [elec., plumbing, framing, etc.] but would not finish the basement off. We were thinking about pricing at about $229,000 to list with about $125k-$130k to build. But lots of earth moving, dozer and back hoe work on a basement along with final grading. We would have to figure it out, but as I said I am really not interest any longer because of the time hit I would have to take. Doing houses would mean we would probably have to give up the Ebay businesses and any hopes of doing any studio art work, making our own clocks, sculpture, table lamps for our Etsy store AND put me back “on the clock” of having to be places at other peoples time schedule and we are supposed to be retired now and make money working in our pajama’s not walking across roof joist in freezing rain and waiting for subs that are a no call no show. 🙂 🙂
I rather be sitting in a bar, eating Mexican and drinking Margaritas rather than supervising houses. Our store motto is “Live to Create and Celebrate”….. so it time for me to do just that.
Do I hear an Amen!
Mike and Susan at MDC Concepts, Inc
MDC Galleries and Fine Art
Smartparts Small Equipment Parts
Ebay, Etsy, ShopifyThat’s us …………
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Agreed. Flipping houses or building new seems like a grind. Not bad money, but its a lot of work for a one time payment.
It’s more fun to build businesses that crank our money month after month.
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Smartparts Small Equipment Parts?
I think I’m the only one reading your signature line …
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Good eye Sharyn:
Yes, we also sell a few industrial parts that I have custom Mfg. as generic clones of actual OEM parts. After the 2008 housing bust and the start of the big recession we quit building houses and doing remodeling but to keep a business going I just transformed into a sub-contractor doing spray foam insulation. Since no houses were being built much, we focused on spray foaming the attics and under crawl spaces with spray foam insulation. 95% effecient as opposed to only 34% effeciency of fiberglass batts or blown in.In any case the spray foam equipment uses a few small parts that are filters and internal parts that are consumable. The filters have to be replaced in the guns often because they clog. They are wire mesh and the OEM Mfg charges almost $5 per pc. They are shaped like a thimble but straight walled. I found I could have them copied and made locally for about $.50 each. So since I am no longer in the Spray Foam business I still sell those parts online to other suppliers. Through Ebay I reach a national market. I Keep about 500 pcs. on hand in both a 60 mesh and an 80 mesh style. Basically coarse and fine and sell them in various size packs from 10 pcs up to 100 pc packs. Used to get close to $3.50 each for them but a jerk competitor [only one] started doing the same and of course it was a race to the lower prices until he finally hit the lowest price he could go, but we both still get over $2.00 per pc. If he ever leaves Ebay, of course up goes the price.
I also do this for a few other parts for spray foam equipment and also will be doing some yard equipment parts soon.
We sold locally for awhile and used the SmartParts name in those divisions. We have a private label based on that name. But I have very rarely used it here on SL. So good eye and good catch.
Mike
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